Being saddled with debt is an uneasy feeling, but it is a fact of life for many Americans. The Motley Fool points out that the total revolving credit outstanding in this country is more than $882 billion, and it is only expected to increase. Credit cards make up a bulk of it, to be sure, but this amount also includes student loans, auto loans and mortgages. Equipping yourself with the right money management tools is critical to climbing out of debt. Here are five financial strategies that will help you overcome what you owe:
1. Use a Calculator to Establish a Repayment Plan
Planning your budget from month to month is an important part of maintaining a balanced money management plan. One great resource to use is an online monthly payments calculator, which can help you figure out your payments on a monthly basis and ensure you are allocating enough money to each. Getting your financial ducks in a row is a good first step to emerging from debt. When you know where all your money is going, you can better manage your finances.
2. Pay Off Debts Strategically
List all your debts from highest to lowest. Next to your debt amounts, write down the interest rates you are paying as well. US News and World Report recommends paying off debts that have the highest interest rates first, paying more on those and just the minimum on the others for now. Once you pay off one debt, move down the list to tackle the next one. It is important to pay more than the minimum whenever you can. If you pay the minimum amount, which is up to three percent of the balance, you're putting off your debt repayment strategy for more months -- and even years -- than you have to since a lot of what you are paying just covers the interest charge.
3. Leave Your Credit Cards at Home
Better yet, cut up the credit cards you have paid off, especially if they are store credit cards with high interest rates. You cannot get rid of all your cards, as you should have one or two main ones for emergencies and major purchases. However, you CAN remove temptation when going out shopping by leaving the credit cards at home and only using debit, cash or check to buy what you need. If you don't have the cash, you can't spend the money.
4. Use Windfalls to Pay Off Debt
The next time you get an unexpected bonus from work or a tax return check, resist the urge to blow it on a luxury purchase, trip or shopping spree. Instead, put it right towards your repayment strategy and pay off your student loans or credit cards. You will thank yourself later for being so strong willed!
5. Change Up Your Daily Habits
Think about it, your daily routine likely got you into debt in the first place: hitting the malls and charging up new outfits, spending $5 on your must-have morning pick-me-up or more for an afternoon lunch with the coworkers, dinners out three nights a week with friends, or splurging on that luxury handbag because you “deserve it.”
Take the time to write down every little purchase you make during the course of a day, and you will likely be surprised at just how much you can save without too much sacrifice. Bring your lunch to work, make your own coffee and reserve splurges for only special occasions. Just changing your daily habits can really make a difference in your budget, leaving more money to pay down debt.
Use these tips to your advantage when structuring your debt management plan. Making a commitment to change is the tough part; once you get into a routine, you’ll likely realize paying down your debt isn’t as nearly as impossible as you thought.
Don’t let the mountain of your debt come in between you and financial independence. Get your finances in check with help from the financial experts at CHROME. At CHROME, we understand how you want your money management to be – a simple solution that makes sense with your way of life. Start making your money work for you, and make an appointment to stop by your local CHROME store today!